A “zero based budget” (ZBB) is the process of starting over to create a budget as opposed to the last periods numbers and adjusting…usually upward.
A ZBB encourages entities (or individuals) to rethink, re jig and reprioritize limited resources. If resources are not limited, you should be building your savings or returning them to stakeholders, whether it is shareholders, taxpayers, members or your spouse…nice problem if you can get there.
Is that something you might be interested in?
Recently we wrote about how Quebec passed a budget with another 4 Billion or so in deficit. Quebec is not alone with these problems. Why? Quite simply there was too much of a play now and pay later attitude.
- More schools…no problem, we will pay the teachers pensions later.
- More police…no problem, we will pay the police pensions later.
- More services…no problem…you get the idea.
Well later has arrived, and the demographics are not working.
So people talk of the need for ‘austerity.’ To tighten belts; slash spending and make the economy bleaker for today…with little chance of a brighter tomorrow. The youth of today think that “that sucks.” Know what, we agree.
The good news is that Quebec is a rich entity. We have resources, both natural and human. We have stability that is provided by a basically fair system; stability of good neighbours and a sound banking and financial systems. So why do we feel so messed up?
- Corruption does not help as it undermines our confidence in the system
- Over-regulation does not help as it coddles and discourages us at the same time
- Over government does not help as the mistaken belief that a new law or a new program can make all our problems go away disillusions us when the reality of politics sets in.
We will once again use the Quebec budget numbers to illustrate our position. First we need to pay our bills, so like any good household, you need to have a plan to spend less than what you make so that you can save money for retirement, relaxation and rainy days – not one of the three, but all of the three.
Quebec Government spends about $95.6 Billion dollars a year:
- Health and social services $36B
- Education and culture $20B
- Economy and environment $12B
- Support for people $ 9B
- Administration and justice $ 7B
- That adds up to $85B
The balance is interest on accumulated debt, that adds up to almost $11Billion.
When times are tough the Government cuts a little here and a little there, annoys all sorts of people and applies a band aid solution to a situation that requires serious surgery. You notice that the word used was surgery and not amputation.
Quebec has about $200 Billion of Gross Debt. Sure its budget documents, show other amounts as well, but it we solve the whole issue so that we can apply savings to lowering taxes. That is what the above mentioned $11Billion goes to service – pay interest on.
Let’s pretend it was a mortgage on your house or condo. If you do not make those payments you will have your property repossessed.
But if we could get someone else to take on the debt, Quebec would save $11 Billion a year on interest – that is enough to make our entire deficit go away and then some.
So if we apply 4 billion of that to balance the current budget, with an understanding that it could only go into deficit, if the government had accumulated surpluses in the past to support the deficit – i.e. in times of recession or crisis.
The remaining 7 Billion, could go to repaying the accumulated debt – 30 years at 7 Billion comes to 210 Billion, so the numbers can work.
How about the interest on that amount? We are glad you asked!
1. If we had such a plan interest rates on borrowing money would be much lower, so interest would be 5.5 Billion a year instead of the current 11 Billion
2. We could get the Caisse de Depot, the manager of about 200B of assets of the Quebec Pension Plan, to manage this program, so no new bureaucrats
3. The government could ask each main budget area, the 5 bullets above each have two areas, to plan savings growing to ½ to 1 Billion per year over the next 4 to 5 years
4. Quebec could allow immigrants to come to Quebec that are prepared to invest a certain amount of money, that will boost our economy – think to the tune of $200,000 per year for a family of four
5. Quebec should look at using some of its assets to secure this debt and allow them to be privatized, in part, pay taxes and run more efficiently. This includes Loto Quebec, SAQ (wine and spirits), Hydro Quebec and others. Savings, wealth and revenues would be significant.
6. Quebec should look at emptying its prisons and detentions centers of non-violent offenders – justice should be swifter, terms shorter and lawyers made more redundant
7. In line with 6) Quebec should legalize marijuana, tax it and get that and other areas that organized crime operate in the legitimate economy.
By taking the above steps Quebec would be well on its way to fixing its house and putting things back in order. Back in order is not enough. Quebec has about 100,000 people per year coming of age.
We should be prepared to lend each and every one of them $15,000 dollars to start a business.
Some will fail.
Some will succeed.
But we would spark a revolution in thinking that could provide ideas to benefit Montreal, Quebec, Canada and the world.
Quebec could be a party town but not only like: Las Vegas + Paris + New Orleans but with all our own charm and tastes. We could become party central as well as a teaching and learning hub. Is that something you might be interested in?
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